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April 22, 2017

By Percis Ofori

Strong political will, technology, urban financing, and regional integration are key factors that could boost resource mobilization in Sub-Saharan Africa, according to development finance experts meeting in Accra.

They discussed the emergence of China, India and Brazil, together with philanthropic and private organizations, as major players in global finance, during a policy learning event organized last week by the African Center for Economic Transformation (ACET) in partnership with the Bill & Melinda Gates Foundation.

The two-day event dubbed “Resource Mobilization and Management”, took place from April 10 to 11 and presented findings of an ACET study titled “Mobilizing and Managing Financial Flows for Development”.

Welcoming participants, ACET’s Chief Economist, Dr. Yaw Ansu, said external resource inflows to Africa should support state-owned transformation agendas rather than donor defined initiatives. “How do we make sure that resources support programs we need rather than what donors want?”, he asked. Economic growth and transformation require adequate resources and the right policies, Dr. Ansu said, noting that the findings of the ACET study would feed into the Resource Mobilization and Management Chapter of the Pan African Coalition for Transformation (PACT), which was launched in Kigali, Rwanda, last year

David Kuijper, former adviser on financing for development at the World Bank, said that official development assistance (ODA) must be targeted at supporting other sources of resource mobilization in developing countries. “An Important use of international public finance is to catalyze additional resource mobilization from other sources”, he said.

Kuijper continued: “A country’s ability to mobilize and spend domestic resources effectively was at the crux of financing for development. There is the critical need to scale up private investments in developing countries to meet development goals. Deploy risk mitigation measures to encourage private sector involvement in domestic resource mobilization”, Kuijper said.

Geoffrey Mwau, Director General of Budget, Fiscal & Economic Affairs at Kenya’s Ministry of Finance, expressed similar views when he highlighted the important role of the private sector and foreign remittances as sources of domestic resource mobilization, as well as the need for serious macro-economic discipline to transform African economies.

One participant emphasized the need for African countries to plan, design and operationalize transformation agendas and get the business sector involved. Participants also called for investment in infrastructure to deal with the complexities of urbanization.

In an overview of external development finance (EDF) management and fiscal policy for inclusive growth, ACET’s Director of Country Engagements and Operations, Dr. Edward Brown, said that the two-year ACET study analyzed how six selected African countries mobilized, allocated and managed external resource inflows and how they managed relations with providers. The countries studied are Burkina Faso, Ghana, Rwanda, Tanzania, Uganda and Zambia and an objective of the study was to share country experiences.

Dr. Brown underscored the need for governments to redirect their efforts from mobilizing revenues within the domestic economy in order to wean themselves from dependence on foreign financing of development projects. “The government has to focus more on efficiency in public expenditure management, which means that there should be due diligence in assessing where resources are going, whether they are applied in areas of national priority and whether they are supporting key interventions that will fuel the growth of the local economy,” Dr. Brown said.

The ACET study shows that the volume of EDF has risen in the selected countries but in real terms (as a percentage of gross national income) remained relatively flat over the last decade. There is an increasing shift from traditional development assistance to other financial, to which international capital flows (foreign direct investment and remittances) are making the largest contribution.

The study also noted that emerging state partners, China, India & Brazil, are more responsive to countries’ economic growth and transformation agendas than are traditional donors.

On the use of technological platforms to improve systems of accountability, the study revealed that Rwanda had a better recording system based on its development assistance data, but even where annual reviews are published online, infrequent updates limit the value of the data.

Chairing a session, Lamin Momodou Manneh, UNDP Resident Representative in Rwanda, highlighted the need to create working platforms for collaboration between multilateral banks and bilateral donors in development finance.

Panel discussions on accessing EDF in the changing external environment, stressed the need for every country to be responsible for its own financing, including through international sovereign bonds, which are the second largest source of development finance beyond ODA. Development banks and donors must work with countries to make financing of strategic projects more affordable, said panelists.

Besides UNDP’s Lamin Momodou Manneh, other panelists included Annalisa Prizzon of the UK’s Overseas Development Institute (ODI), Siaka Fanny, from the Ministry of Economy and Finance in Côte d’Ivoire, UNECA’s Adam Elhiraika and Ronald Nkusi, of Rwanda’s Ministry of Finance. The discussion was moderated by Richard Carey, former director of development co-operation at the OECD.

During the breakout sessions, participants emphasized the need for governments to strengthen both tax systems, and monitoring and evaluation systems, to help mobilize domestic resources. Governments were also urged to play an effective leadership role in coordinating resources. While finance and planning systems need to be balanced in generating transformation agenda, urban finance was seen as fundamental.

In a presentation on strengthening domestic resource mobilization, ACET’s Director of Research, Joe Amoako-Tuffour, said citizens should understand that taxes must be paid to raise revenue. Personal identification was also seen as essential to tax systems in Africa. “But without taxes that favour the poor and a good information system, we can’t collect taxes”, Amoako-Tuffuor said. He said to mobilize resources domestically required strong political will.

Panelists highlighted the need for developing countries to adopt a comprehensive strategy when it comes to resource mobilization, and to strengthen national systems. Technology and strong political will were identified as essential to domestic resource mobilization, while tax systems needed to be strengthened in the context of regional integration. Citizens were encouraged to hold governments accountable in the mobilization of resources and to insist that financial information be made public and accessible at all times.

Sovereign wealth funds were viewed as important sources of funding to close gaps in budgetary allocations, while strong tax compliance was needed to strengthen the tax base. Governments were urged to consider beneficial ownership and country by country reporting to help curb illicit financial flows. Panelists also recommended that the focus of revenue mobilization should be on tax administration rather than tax collection. A taxpayers database and simplicity in the tax system are essential in increasing tax revenue, while dispute resolution mechanisms must be strengthened to build the trust of taxpayers and improve mobilization. Participants called for expansion of the tax to gross domestic product (GDP) to increase revenue mobilization.